Q4 2020 Bally’s Corp Earnings Call LINCOLN Mar 4, 2021 (Thomson StreetEvents) — Edited Transcript of Bally’s Corp earnings conference call or presentation Thursday, March 4, 2021 at 1:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Adi Dhandhania; VP of Strategy and Interactive * Craig L. Eaton Bally’s Corporation – Executive VP, General Counsel, Compliance Officer & Secretary * George T. Papanier Bally’s Corporation – President, CEO & Director * Marc A. Crisafulli Bally’s Corporation – Executive VP of Strategy & Operations, President of Rhode Island Operations and Director * Stephen H. Capp Bally’s Corporation – Executive VP & CFO ================================================================================ Conference Call Participants ================================================================================ * Barry Jonathan Jonas Truist Securities, Inc., Research Division – Gaming Analyst * Brett Richard Andress KeyBanc Capital Markets Inc., Research Division – Associate VP * Jeffrey Austin Stantial Stifel, Nicolaus & Company, Incorporated, Research Division – Associate * John G. DeCree Union Gaming Securities, LLC, Research Division – Director and Head of North America Equity & High Yield Research * Jordan Maxwell Bender Macquarie Research – Analyst * Lance William Vitanza Cowen and Company, LLC, Research Division – MD & Cross-Capital Structure Analyst ================================================================================ Presentation ——————————————————————————– Operator  ——————————————————————————– Good morning, and welcome to the Bally’s Fourth Quarter 2020 Year-end Earnings Conference Call. (Operator Instructions) I’d now turn the call over to Craig Eaton, Executive Vice President and General Counsel. Please go ahead. ——————————————————————————– Craig L. Eaton, Bally’s Corporation – Executive VP, General Counsel, Compliance Officer & Secretary  ——————————————————————————– Good morning, everyone, and thank you for joining us on today’s call. By now, you should have received a copy of our Q4 and full year 2020 earnings release issued earlier this morning. If you haven’t, the earnings release and presentation that accompanies this call are available in the Investor Relations section of our website at www.ballys.com under the News and Events and Presentations tabs. With me on today’s call are George Papanier, our President and CEO; Steve Capp, our Chief Financial Officer; Marc Crisafulli, our Executive Vice President of Strategy and Operations; Phil Juliano, our Marketing Officer; Joe McGrail, our Chief Accounting Officer; and Adi Dhandhania, our Vice President of Strategic Transactions and Interactive Development. Before we begin, we would like to remind everyone that comments made by management today will contain forward-looking statements. These forward-looking statements include plans, expectations, estimates and projections that involve significant risks and uncertainties. These risks are discussed in the company’s earnings release and SEC filings. Actual results may differ materially from the results discussed in these forward-looking statements. During today’s call, management will refer to certain non-GAAP financial measures. Reconciliations to the most comparable GAAP financial measures are included in the schedules contained in our earnings release. We do not provide a reconciliation of forward-looking non-GAAP financial measures due to our inability to project special charges with certain expenses. Today’s call is also being broadcast live on our investor site and will be available for replay shortly after the completion of this call. I’ll now turn the call over to George. George? ——————————————————————————– George T. Papanier, Bally’s Corporation – President, CEO & Director  ——————————————————————————– Well, thank you, Craig. Good morning, everyone, and thanks very much for joining us. We’re extremely excited to take this time to recap the fourth quarter and 2020 as a whole and provide some additional color on several of the recent announcements that we’ve made. Since our last call, we have continued to make significant progress across our strategic growth initiatives. We have a lot to discuss. So we’ll get right into it. I want to start by commenting on incredible and transformative year 2020 was for our company through the various strategic acquisitions and partnerships that we have announced, we continued our evolution from a single property operator in Rhode Island to a leading national player with soon to be 15 casino properties across 11 states, and a significant mobile and online presence. Our primary goal is to continue to work to become the premier, truly integrated omnichannel U.S. gaming company with a B2B2C business model, and we feel that we have taken the necessary steps to best position the company to achieve that target. To start, we have continued to adapt and adjust to what are very dynamic and unpredictable market conditions as a result of the COVID-19 pandemic. For a period of time this year, all of our properties were shutdown in accordance with CDC guidelines. We took this time to evaluate our operations, and we believe that many of the efficiencies we were able to realize as a result of the shutdown are sustainable over the long-term and will result in improved profitability for our properties going forward. While we had been operating at some level with still limited capacity across our entire properties in the third and early fourth quarter, the second wave of COVID restrictions forced us to close our Twin River Casino Hotel and Tiverton Casino Hotel in Rhode Island for 3 weeks between November and December, impacting our fourth quarter results. Notwithstanding that shutdown, market indications and preliminary results show markedly stronger consumer demand in January and February, but not impacted by weather, including the Rhode Island operations, as both properties in that state are now operating 24/7. At this point in time, we are pleased to have all of our properties across the portfolio open and operating with comprehensive health and safety protocols in close consultation with state regulators, health officials and local jurisdictions. As the reopening process progresses across our brick-and-mortar locations, coupled with the vaccine rollout, we believe we’ll be able to operate at closer to historical operating levels, and we are confident that we will continue to benefit from a strong rebound in demand. Now diving deeper into our quarterly results. Overall revenue for the fourth quarter of 2020 decreased 9.4% to $118.1 million from $130.4 million in the fourth quarter of 2019. In addition to the impacts from the Rhode Island closures, the various state travel and capacity limitations due to COVID-19, revenue at the Hard Rock Biloxi was negatively impacted by the effects of the Hurricane Zeta in late October, and we were forced to close that property for 3 days for damage repairs. The decrease in revenues was partially offset by the incremental revenues generated from the recent acquisitions of Casino KC and Casino Vicksburg, which were acquired on July 1, 2020. Bally’s Atlantic City Hotel & Casino, which was acquired on November 18, 2020, and the Eldorado Resort Casino Shreveport, which was acquired on December 23, 2020. We ended the fourth quarter with adjusted EBITDA of $21.2 million, a decrease of $19.2 million or 47.6% in the same period in 2019. Despite the impacts from business disruptions already mentioned, there was also very encouraging signs in the fourth quarter. None more than so than in Kansas City, where our second quarter of ownership and our first with our systems fully online and marketing calendar in place, the property had its strongest operating fourth quarter since they began tracking in 2004. This is being driven by our execution of a more aggressive marketing effort, focused on player relationships, and the early results are very encouraging. In addition to the marketing campaign, since closing the acquisition in July, we have begun to implement our redevelopment initiatives in Kansas City to recapture customer segments that were lost over the last several years while enhancing customer offerings and amenities. Once completed, our new land-based facility, KC, will house all of our non-gaming activities and include branded restaurants, our future sportsbook and retail outlets and will link to the existing parking structure of the casino to provide a stronger sense of arrival and an overall better customer experience. If you look at the other properties across our portfolio, we have a proven history of transforming locations for the better, and Q4 is proof of this strategy, with confidence that Kansas City residents will see the same type of improvements and impact with Casino KC. At properties where we continue to operate with less COVID restrictions, notably in the Southeast segment and Dover, we continue to mitigate the impact of the revenue reductions by implementing operational efficiencies. The resulting positive impact on margins is notable and continued to trend since reopening from the pandemic. Margin improvements were primarily driven by labor savings, reduced marketing and promotional spend and a reduction in lower-margin amenities. Another key impact on Q4 results was Atlantic City. Since closing the acquisition of Bally’s Atlantic City Hotel & Casino in late November, operations were impacted by a combination of seasonality, year-over-year revenue impacts due to COVID-19 restrictions and a very complicated methodical decoupling from the legacy Caesars IT systems and Caesars Reward Program, which was largely completed by mid-February. This negatively impacted fourth quarter adjusted EBITDA by $5.9 million. It should be noted, though, that Q4 and Q1 were traditional loss-making quarters for the property even without the complicated factors I just mentioned. We believe these impacts will begin to dissipate in the second half of Q1 and see a path to profitability as we move into historically more profitable Q2 and Q3 time periods. Additionally, we continue to execute on our integration and strategic plan for Bally’s AC. On a targeted basis, we are greatly improving the property and customer experience, including a phased hotel room refurbishment and the addition of several new amenities, including new and robust food and beverage offers. These CapEx projects will be spaced out over multiple years, starting early this year to minimize any customer disruption. We also successfully opened a temporary sportsbook location within the Bally’s Atlantic City property through our previously announced partnership with FanDuel and have begun work on a permanent location. We’re very excited to expand our relationship with FanDuel by adding a robust market like Atlantic City. As we have discussed, New Jersey represents extremely attractive market opportunity, and our partnership with FanDuel is just the latest announcement involving sports betting and iGaming in the state, where we’ve acquired 3 sports betting and 5 iGaming skins. This builds on our partnership with PointsBet, Esports Entertainment, Sporttrade and Assure and theScore, all of which are accretive to earnings and add unique elements to the cutting-edge New Jersey mobile gaming market. Now I’ll briefly comment on some of the other major achievements in 2020. Notwithstanding the impact of COVID-19 pandemic on our industry, we continue to advance our disciplined portfolio diversification strategy, opportunistically expanding our regional presence through accretive transactions. In total, we closed on and announced 10 property acquisitions in 2020, which will expand our presence to 15 properties across 11 states once all pending acquisitions are completed. We closed on the acquisitions of 7 casinos, 3 in Black Hawk, Colorado; KC, Kansas City; Missouri, Lady Luck Casino in Vicksburg, Mississippi; Bally’s Atlantic City in Atlantic City, New Jersey; and Eldorado Shreveport in Shreveport Louisiana. In addition, we expect that our previously announced acquisitions of the MontBleu Resort Casino & Spa in Lake Tahoe, Nevada; Jumer’s Casino & Hotel in Rock Island, Illinois; and the Tropicana Evansville in Evansville, Indiana, will all close in the first half of 2021 pending regulatory approval. In early November, we acquired the iconic Bally’s brand from Caesars Entertainment and rebranded the company as Bally’s Corporation with a new ticker BALY, which became effective on November 9, 2020. As many of you know, the Bally’s brand has a rich history of gaming and entertainment that provides immediate and enhanced nationwide recognition. We continued to develop our plans for how best to leverage this prestigious brand across our portfolio. I look forward to providing further updates on the rebranding rollout over the next several months. We also announced the acquisition of Bet.Works and its proprietary technology platform. We will power our online sports betting and iGaming offerings under the newly formed Bally’s Interactive division as well as a market access agreement in Iowa for the Lake Casino resorts. At the same time, we formed a long-term media partnership with Sinclair Broadcast Group, which provides us with an unrivaled national media and marketing access across Sinclair’s linear and digital assets as well as exciting content integration opportunities. Sinclair, with its broad holdings of stations, channels and RSNs, provides immediate national brand recognition that will support the development of Bally’s supplier database for both our traditional casinos as well as our future online offerings and ultimately deliver significant shareholder value. When you combine all of these elements with our foundational, expanding brick-and-mortar presence, we really feel that we have transformed the company and best positioned ourselves for success in 2021 and beyond. We look forward to capitalizing on evolving industry trends, on online sports betting and iGaming as a premier omnichannel provider of gaming and entertainment in the U.S. as well as pursuing additional market access opportunities in states where Bally’s currently does not have a presence as sports betting legislation continues to roll out. I would also note that 2021 is already off to a great start with our announced agreement to develop, construct and manage a Category 4 licensed casino in Center County, Pennsylvania. We also recently submitted a proposal to the city of Richmond to develop the Bally’s Richmond Casino Resort, a $650 million world-class destination resort, hotel and casino in Richmond, Virginia. We also added differentiated arms through our Bally’s interactive platform with the acquisition of Monkey Knife Fight, the fastest-growing daily fantasy sports site in North America and SportCaller, a leading global B2B provider of free-to-play games, and entered into our first strategic sports betting partnership with the National Hockey League, providing us with rights to use the league’s official marks, logos, and data as part of our diversified sports betting platform. I am extremely proud of all of the great work that our teams have accomplished, and most importantly, their commitment to keeping our customers and each other safe throughout this challenging environment. I will now turn the call over to Marc. ——————————————————————————– Marc A. Crisafulli, Bally’s Corporation – Executive VP of Strategy & Operations, President of Rhode Island Operations and Director  ——————————————————————————– Thanks, George, and good morning, everyone. Of the many exciting projects and initiatives that George mentioned, I want to focus first on our newly formed Bally’s Interactive division. As we announced on November 18, in conjunction with our acquisition of Bet.Works, Bally’s is forming 2 distinct operating divisions, Bally’s Casinos, which will be comprised of our physical gaming and entertainment properties; and Bally’s Interactive, which will include new and exciting contracts for sports betting and iGaming. Since this announcement, we have made significant progress towards launching our interactive division, even as we await a regulatory approval for the Bet.Works acquisition, which we currently expect will be in the second quarter. As George mentioned, on January 18, we announced the acquisition of Monkey Knife Fight, the fastest-growing daily fantasy sports site in North America in an all-stock transaction. After the closing of this transaction, which we expect will happen later this month, Monkey Knife Fight will provide our Interactive division with market-leading fantasy sports content and a brand whose player database can be developed and leveraged to support the launch of our sports betting and iGaming operations. Daily Fantasy is a high-growth element in what is a rapidly expanding industry and adds another layer of differentiation to our omnichannel approach. Additionally, on February 8, we completed the acquisition of SportCaller, a leading global B2B free-to-play game provider. SportCaller will enable us to launch our own suite of free-to-play games this year and will generate excitement for our Bally Bet sports betting app, which we anticipate launching in the second quarter. SportCaller will also expand our geographic presence internationally as they have more than 100 games in over 20 languages and over 30 sports across 37 countries. The addition of these 2 platforms serves as the foundation of our Interactive division, enabling us to support Bet.Works development resources and support accelerated innovation and deployment of new products that are already underway. With each announcement, we are making significant progress towards the goal to become the first omnichannel gaming company, operating physical casinos with seamlessly integrated digital solutions. We firmly believe in the digital future and continue to actively position the company to capitalize on opportunities in the fast-growing U.S. online sports betting and iGaming market. We will continue to adapt as sports betting legislation continues to unfold across the country and look forward to pursuing additional market access opportunities in new states. I would also highlight that the recent acquisitions on the Interactive side are complemented by our long-term strategic media partnership with Sinclair Broadcast Group. By leveraging the expansive reach of Sinclair’s linear and digital assets, which span 88 markets, 190 television stations and 19 regional sports networks, we will be able to engage sports fans across the country by providing unique and engaging interactive offerings as well as expand our player database in states that currently do not permit sports betting. Our teams are working together to develop this exciting platform, which we expect to begin rolling out next quarter. Now let me take a minute to update you on the status of our other pending transactions. We continue to make progress on regulatory approval in Nevada and believe we are on track to close MontBleu in Lake Tahoe later this month. We currently believe Jumer’s in Illinois and Tropicana Evansville in Indiana will close in the second quarter of 2021. We look forward to working with the local regulatory authorities to receive all of the necessary approvals and complete these acquisitions. Finally, an update on the status of our proposed joint venture with IGT. As we have noted, this proposed agreement requires the Rhode Island legislature to pass a public law, authorizing the state to enter into or amend several contracts. The proposed agreements would also result in changes to our regulatory agreement in Rhode Island, including an increase in the maximum leverage ratio to 5.5x and greater flexibility of sale-leaseback transactions relating to the Rhode Island assets. We are optimistic that this legislation will be addressed and improved as soon as the second quarter of 2021. We expect this legislation will be accretive to us and position us to compete more effectively in the region as we feel it will provide us with state-of-the-art VLTs and a mechanism for ensuring we have a competitive slot floor well into the future. The extended agreement also gives us the horizon we need to support additional investment in our facility and amenities and would deliver a positive financial return for our shareholders even before taking into account any improved performance driven by our increased competitiveness. The Rhode Island House of Representatives Finance Committee has scheduled a hearing on this legislation for next Tuesday, March 9. We plan — we will — we plan to provide further update as this develops. I will now turn it over to Steve. ——————————————————————————– Stephen H. Capp, Bally’s Corporation – Executive VP & CFO  ——————————————————————————– Marc, thank you. First, just a bit of a deeper dive into our results from the fourth quarter. As George mentioned, we were forced to close our 2 Rhode Island properties in December. This 3-week shutdown adversely impacted gross gaming revenue for the quarter as numbers were off by approximately 80% in December year-over-year. That’s a pretty big hit. When compared to our strong October performance, the closure impacted our results by approximately $8 million to $9 million of EBITDA just in Rhode Island. However, with this shutdown now behind us, as George mentioned, there are some very strong signs of new strength starting so far in Q1. However, our Southeast and West segments were once again particularly strong performers for the quarter even with the hurricane disruption, George noted, with Hurricane Zeta. Shreveport, which acquisition closed on December 23, was actually a contributor, providing nearly $1 million — nearly $1 million of adjusted EBITDA in our 8 days of ownership at the end of the year. Also, as mentioned by George, we also acquired Bally’s Atlantic City in the fourth quarter. Historically, the second and third quarters are the strongest quarters due to increased visitation and traffic in the spring and summer months, which we expect to help offset some of the softness we experienced in the fourth quarter following the closing of that acquisition. Net income in the fourth quarter of 2020 on a GAAP basis was $20.2 million, an increase of $6.9 million from net income of $13.4 million in the fourth quarter last year. Income in the quarter was impacted by several large onetime nonoperating charges and income items. Notably, bargain purchase gains totaling $63.9 million which were recorded on the company’s Q4 2020 acquisitions of Bally’s Atlantic City and Eldorado Shreveport; a noncash charge associated with the accounting for equity awards issued to Sinclair as part of our media partnership, which totaled $57.7 million; and a $50 million tax benefit recorded in the quarter as a result of the utilization of net operating loss carrybacks under the CARES Act. We believe this tax item, along with some other tax impacts from 2020, will result in a cash tax refund of over $80 million in 2021, which will largely defray the expected cash tax payments we will likely need to make in the next year. Last comment on the brick-and-mortar business. As we have posted on our website, we see the full run rate consolidated adjusted EBITDA of our full portfolio, including acquisitions under contract in excess of $300 million. We consider that number to be a middle of the road number. It does not reflect the full earning potential from CapEx expenditures, which both Marc and George touched on a bit, including at Kansas City at the — at Bally’s Atlantic City and in — at our Lincoln Property as well. So as George mentioned, transformationally, we have moved this company from what it was in 2019 right through 2020 into a cash flow generating machine in excess of $300 million on a pro forma look forward basis. Those are our management expectations. Now I’d like to address cash and liquidity. As of December 31, we had cash on hand of approximately $123 million. Pro forma for the approximately $27 million paid at closing for SportCaller in February. And taking into consideration the $215 million that was available for borrowing under our revolving credit facility, our pro forma liquidity total was approximately $311 million. When compared to the cash outlays that we expect from committed acquisitions under contract in the next 12 months, which is comprised of $120 million for Jumer’s, $62.3 million for Bet.Works and 0 for both Evansville in Indiana and Monkey Knife Fight. Given that the restructure and use of equity, respectively, we have pro forma liquidity of approximately $128 million. The $15 million purchase price from MontBleu has payment deferred for 1 year from closing. In addition, we recently executed a consent solicitation with the holders of our high-yield notes in order to permit additional debt capacity to support possible future borrowings solely to enhance our liquidity. As such, we now have the ability to increase our revolver by more than $200 million above the existing revolver size of $250 million. We’re likely to do so in the near future, not for any particular funding need, but rather for an abundance of available liquidity. In addition to all that, we expect to increasingly generate free cash flow from operations from brick-and-mortar as our business rebounds post-COVID. Excluding cash paid for acquisitions, we generated over $10 million of free cash flow in the fourth quarter on adjusted EBITDA of only $20 million under the real COVID spike in the fourth quarter. We feel that even with the softness we experienced in the fourth quarter due to regional limitations, we’re in a very comfortable liquidity position, and we will remain in a conservative leverage neighborhood considering pro forma cash flows with plenty of dry powder to continue to pursue opportunistic M&A prospects. Now turning to CapEx. Our Center County, Pennsylvania development project with Ira Lubert will take approximately 1 year to complete, following the receipt of acquired regulatory approvals, operating certificates and other customary closings. The total cost of the project is approximately $120 million, and we expect to begin construction in the back half of this year, pending Pennsylvania regulatory approval. Should the Rhode Island legislation pass, as mentioned by Marc, the Lincoln expansion project will occur over about 18 months commencing as soon as practicable. We expect that CapEx to hit both 2021 and 2022 year — calendar years. We continue to make progress on our redevelopment plan at Casino KC for approximately $40 million. That project should greatly enhance the property and guest experience, driving growth and a nice return for us on that investment. The Casino KC project is largely a second half 2021 event with planned groundbreaking in May, and we expect it will finish sometime in 2022. And as George mentioned, our capital investments in New Jersey are underway. We expect to spend approximately $25 million in the 2021 year. Based on the current and pending portfolio of properties, we expect our ongoing maintenance CapEx run rate in the range of $35 million to $40 million annually. And at this point, there have been no material changes to the project CapEx plans we discussed last quarter. My final remark. Look, we continue to be situationally opportunistic in expanding this company in terms of physical properties as well as our interactive platform and delivering accretive growth for our shareholders and other stakeholders. Our pro forma leverage remains moderate, our liquidity profile is very strong, and we have considerable unencumbered real estate. That combination is foundational to our ongoing growth ambitions as an omnichannel provider of brick-and-mortar and interactive gaming entertainment to a very large and growing customer base. And with that, I’ll turn it back over to George. ——————————————————————————– George T. Papanier, Bally’s Corporation – President, CEO & Director  ——————————————————————————– Well, thank you, Steve. 2020 was truly a pivotal year for Bally’s, and we were very excited about what’s in-store for 2021 and beyond. With that, I’ll now ask the operator to open it up for questions. ================================================================================ Questions and Answers ——————————————————————————– Operator  ——————————————————————————– (Operator Instructions) Your first question comes from the line of Barry Jonas with Truist Securities. ——————————————————————————– Barry Jonathan Jonas, Truist Securities, Inc., Research Division – Gaming Analyst  ——————————————————————————– I just wanted to start with Interactive. Can you talk about sort of timing before we’ll see a full launch? And once we are up and running, how should we think about the ramp? ——————————————————————————– George T. Papanier, Bally’s Corporation – President, CEO & Director  ——————————————————————————– Thanks, Barry. I’m going to turn this over to Marc. ——————————————————————————– Marc A. Crisafulli, Bally’s Corporation – Executive VP of Strategy & Operations, President of Rhode Island Operations and Director  ——————————————————————————– So what you should think about in terms of Interactive for us is, as you saw in the release, we’re now going to close on Bet.Works. It looks like it will be towards the end of the second quarter of the year. And so we’ll focus on ramping up in the states that they’re in first. So there are 4 of them. It’s New Jersey, Colorado, Iowa and Indiana, and we’ll be targeting getting all of those rolling in the second half of 2021. ——————————————————————————– Barry Jonathan Jonas, Truist Securities, Inc., Research Division – Gaming Analyst  ——————————————————————————– Okay. Great. And then once you are up and running, is this sort of — what are sort of expectations in terms of how you’ll build up market share? Do you think you’ll kind of hit the ground running? Or more of a slower pace? ——————————————————————————– Marc A. Crisafulli, Bally’s Corporation – Executive VP of Strategy & Operations, President of Rhode Island Operations and Director  ——————————————————————————– Look, it’s a little hard to tell right now until we get it closed and up and running. But obviously, we want to make sure we’re building it properly for the long term. So we have to see how those initial launches go, and then we’ll start to layer in additional states beyond that. So you can expect a pretty ambitious program through 2022 as we bring all of those assets online. ——————————————————————————– Barry Jonathan Jonas, Truist Securities, Inc., Research Division – Gaming Analyst  ——————————————————————————– Great. And then just with Sinclair, can you just maybe help us understand how you think about risks around cord cutting? Maybe just walk through sort of the streaming or interactive strategy beyond just TV? ——————————————————————————– Marc A. Crisafulli, Bally’s Corporation – Executive VP of Strategy & Operations, President of Rhode Island Operations and Director  ——————————————————————————– Yes. So let me just take a step back on Sinclair. I think it’s helpful. Look, Sinclair is the largest owner of sports rights in America. Over time, we believe it will grow, and it will make sense for a scaled player to negotiate on behalf of the industry. As the sports industry recovers from COVID and as we start having a full calendar of sports, we expect a recovery and think of the RSNs that Sinclair has as an important component for us to execute our vision. When we did our deal with Sinclair, the diamond bonds were trading at a significant discount, and we structured the deal accordingly to plan for a contingency across other assets owned by Sinclair. Look, we are pleased with the commitment of our partner and have a plan to capitalize on the gamification opportunity with all of their assets. Furthermore, as you may be aware, we signed our deal with the parent company and still believe that there is significant opportunity to capture value. Barry, you can expect us starting to roll out all of the platform renaming in the second quarter, it will start early second quarter, and we’re pretty excited about going to work. ——————————————————————————– Operator  ——————————————————————————– Your next question comes from the line of Jordan Bender with Macquarie. ——————————————————————————– Jordan Maxwell Bender, Macquarie Research – Analyst  ——————————————————————————– On the call you hosted following the Sinclair and Bet.Works partnerships, you felt comfortable with the conservative 10% market share. With the NHL, Monkey Knife Fight and SportCaller, do you see upside to that 10% number on a run rate basis? ——————————————————————————– George T. Papanier, Bally’s Corporation – President, CEO & Director  ——————————————————————————– I’m going to leave that with Marc. ——————————————————————————– Marc A. Crisafulli, Bally’s Corporation – Executive VP of Strategy & Operations, President of Rhode Island Operations and Director  ——————————————————————————– Yes, we’re not going to make any change to how we’re thinking about it right now. These are all moves that we had anticipated. Obviously, Monkey Knife Fight and SportCaller weren’t specific moves, but they’re all part of our broader strategy to make sure we have all of the different products that we need to offer a full suite of options to our customers. So I wouldn’t anticipate any changes in how we’re thinking about things right now. We’re just continuing to build out our strategy to make sure we control technology and have all the products we need so that we can innovate and bring everything to life. So I wouldn’t be making any changes on any of that yet. ——————————————————————————– Jordan Maxwell Bender, Macquarie Research – Analyst  ——————————————————————————– Okay. And then turning to the Virginia Casino. Can you talk about possible financing for the project, would you be open to using a REIT? And then what is the ideal opco/propco structure for the total company? ——————————————————————————– George T. Papanier, Bally’s Corporation – President, CEO & Director  ——————————————————————————– Steve, do you want to handle that? ——————————————————————————– Stephen H. Capp, Bally’s Corporation – Executive VP & CFO  ——————————————————————————– Yes. Let me take the second one first. In terms of optimal opco/propco, listen, we don’t have a number in mind necessarily. We intend to be opportunistic in the use of our unencumbered real estate on a go-forward basis. Look, we’re not going to — I don’t think we’re going to embrace the 100% opco model anytime soon. Rather, we’ll use real estate selectively here and there so that a portion of the real estate portfolio is used for financing purposes. We think a more moderate approach there in — combined with the traditional — more traditional capital structure makes a bit more sense. And one of the reasons for that, quite frankly, is when you look at the credit markets, we believe that a portfolio that’s grounded in real assets is relatively more attractive to the secured and the unsecured credit markets alike and that over time, will provide returns in terms of cost of capital that makes sense in that regard. So very moderate on that side. And then — sorry, what was the — repeat the question on Virginia, again, once more, would you please? ——————————————————————————– Jordan Maxwell Bender, Macquarie Research – Analyst  ——————————————————————————– Yes. You kind of covered it there. I was just asking on the possible financing behind that project? ——————————————————————————– Stephen H. Capp, Bally’s Corporation – Executive VP & CFO  ——————————————————————————– Yes. Listen, that one and Pennsylvania, as a matter of fact, we’re kind of eyes wide open right now. In projects that are jointly owned, sometimes it’s just cleaner to kind of straight project finance those. So you might see an off-balance sheet financing there, depending on credit markets, project financing market conditions kind of come and go. But given common — given multiple ownership or I should say, non-wholly-owned ownership there, we might look to straight project finance one or both of those. Your question about REITs remains a possibility. And then, of course, there’s always a possibility of bringing it on balance sheet and doing it that way. So we’re kind of looking at those 3 angles on both of those properties, as a matter of fact. ——————————————————————————– Jordan Maxwell Bender, Macquarie Research – Analyst  ——————————————————————————– Okay. And then one more here. I don’t know if I missed it. Do you give a CapEx — growth CapEx number for the year. I know there’s a couple of moving parts with some of these projects? ——————————————————————————– Stephen H. Capp, Bally’s Corporation – Executive VP & CFO  ——————————————————————————– Well, we mentioned for the year we might spend upwards of about $25 million — look, it all depends on markets reopening post-COVID, of course. So don’t quote us on this, but our expectations are, we might spend upwards of $25 million to $30 million in Atlantic City kind of towards the back end of the year, again, depending on COVID limitations being lifted. We do intend to break ground in Kansas City in the kind of the May-June time frame. That’s a $40 million project. You’ll probably see a good portion of that $40 million spent this year. And then as Marc outlined regarding the Lincoln, that CapEx is dependent upon the legislature passing the IGT contract for us. And so that’s a bit of a binary kind of go, no-go on that project. But we expect that will get done in the next month or 2, as mentioned. And so probably in the neighborhood of $20 million to $30 million of CapEx later this year at that project as well. That’s about it for the growth project CapEx on the brick-and-mortar side for 2021. ——————————————————————————– Operator  ——————————————————————————– Your next question comes from the line of Brett Andress with KeyBanc Capital. ——————————————————————————– Brett Richard Andress, KeyBanc Capital Markets Inc., Research Division – Associate VP  ——————————————————————————– Marc, hoping you could — hoping — Marc, you’d show little bit more light on the timing of the rollout of the 4 states. I think you said the second half, but is that something before football season? Just any more details on what you expect there? ——————————————————————————– Marc A. Crisafulli, Bally’s Corporation – Executive VP of Strategy & Operations, President of Rhode Island Operations and Director  ——————————————————————————– Yes. Look, you’ll definitely see some before football season. But until we actually get the acquisition of Bet.Works closed, it’s really hard to get into that level of granularity. We’re obviously working on things already. So you would expect to see at least some of them open before football season, and we’ll have more of an update for you once we get the closing done of Bet.Works. ——————————————————————————– Brett Richard Andress, KeyBanc Capital Markets Inc., Research Division – Associate VP  ——————————————————————————– Got it. Okay. And then as you think about Monkey Knife Fight, one, how quickly can you start to leverage that business once you close it on the RSN ecosystem there? And then secondly, how does that business in SportCaller fit into the bigger free-to-play customer acquisition strategy? Maybe what I’m trying to get at is, more specifically, how additive do you think these products could be to that $40 million database? ——————————————————————————– Marc A. Crisafulli, Bally’s Corporation – Executive VP of Strategy & Operations, President of Rhode Island Operations and Director  ——————————————————————————– So it’s a good question. I’m going to turn this over to my colleague, Adi Dhandhania, who’s our VP of Strategy and Interactive, and he can provide a little more color on that for you. ——————————————————————————– Adi Dhandhania; VP of Strategy and Interactive,  ——————————————————————————– Sure. Thank you for the question. So as it relates to Monkey Knife Fight, we feel pretty optimistic that we have a pathway to use their content and leverage their content across Sinclair’s assets, be it on the digital side and/or doing something with them on the linear side as well. As it relates to SportCaller and Monkey Knife Fight and how we think about the database is, look, for us, this is a top of funnel opportunity. When we think about free-to-play in SportCaller, it helps us build that top of funnel customer database that we could eventually convert to real money esports betting. What DFS and Monkey knife Fight had offer to us is the opportunity to build the database in states we don’t currently operate in or are not legalized. And what we’ve seen with peers in our industry is, that’s a great way to cross over and sell to the real money platform. So we have now a massive portfolio that has a free-to-play DFS, if someone wants to use skill and then you have real money sports betting just to convert the funnel and get them onto the Bally’s bet platform. ——————————————————————————– Brett Richard Andress, KeyBanc Capital Markets Inc., Research Division – Associate VP  ——————————————————————————– Got it. Okay. And then if I could squeeze one more. It does seem like the casino business improved here, January, February. Just hoping you could put some numbers around that, maybe more focused on Rhode Island or any property you want to highlight? If you just give us any sense of maybe property level margins here, just trying to frame up some kind of 1Q kind of margin run rate for the business as things start to reopen? ——————————————————————————– George T. Papanier, Bally’s Corporation – President, CEO & Director  ——————————————————————————– Steve, do you have — are we that granular with numbers in January, February? I know we’re talking top line. ——————————————————————————– Stephen H. Capp, Bally’s Corporation – Executive VP & CFO  ——————————————————————————– Yes. Look, we’re not ready to let go much granularity there, George. Look, what we’ve got for you at this point is kind of the overarching commentary that the market indications and our preliminary book closings have the business turning around rather handsomely in January and February. But stay tuned, more detail, love to come later, but we’re feeling very good about the strength of the business so far this quarter. ——————————————————————————– George T. Papanier, Bally’s Corporation – President, CEO & Director  ——————————————————————————– And I’ll just add one thing to that. We are maintaining the improvement in margins that we’ve seen coming out of the reopening for the most part. So we’re happy — we’re glad to see that. ——————————————————————————– Operator  ——————————————————————————– Your next question comes from the line of John DeCree with Union Gaming. ——————————————————————————– John G. DeCree, Union Gaming Securities, LLC, Research Division – Director and Head of North America Equity & High Yield Research  ——————————————————————————– If I could try one more time at asking the last question perhaps a little differently. Steve or George, not sure if you can provide a little bit more anecdotal color when you think about the reopening of Rhode Island relative to the reopening earlier in 2020, any comparison and similarity? Is it has consumer demand been similar on return? Obviously, some seasonality might be in play there, but if you can kind of compare it to the last opening or reopening? ——————————————————————————– George T. Papanier, Bally’s Corporation – President, CEO & Director  ——————————————————————————– It’s much — well, we’re focused on Rhode Island, it significantly improved over the reopening right after COVID. And it’s actually been the strongest so far quarter of the year, I’ll say. So — and you could just look at top line in the state once we came out of the 21-day closure. January continued the trend of October, but actually a little bit better. And in February, other than the impact of weather, because we had that kind of train event of weather through that 10-day period of time, the trend for the days that were not impacted by weather in February were consistent with the trend line in January. So we’re feeling good about that. ——————————————————————————– Stephen H. Capp, Bally’s Corporation – Executive VP & CFO  ——————————————————————————– Yes. John, this is anecdotal, but it appears that George’s comments are supported by an increasing level of comfort with our customer base around the vaccine, and we’re seeing — we’re just seeing stronger numbers. ——————————————————————————– John G. DeCree, Union Gaming Securities, LLC, Research Division – Director and Head of North America Equity & High Yield Research  ——————————————————————————– That’s great additional color. I appreciate that. And if I could ask 1 question on plans for future market access. You’ve kind of taken 2 approaches so far, I think one market access agreement and then announced a project in Pennsylvania as well as Richmond, which appears to be kind of a stand-alone investment. But when you think about going forward, can you talk a little bit about the strategy of market access? Will you look to do more kind of asset-light market access agreements? Could we see some more opportunistic M&A on the land-based side? And in addition to kind of how you’ll approach it, any sense of timing or how ambitious you might want to be in adding states, realizing that maybe it’s a back half of the year where you really start to launch and already have a couple of states to go. So your strategy on market access going forward and how aggressively you’ll pursue selling out the map? ——————————————————————————– George T. Papanier, Bally’s Corporation – President, CEO & Director  ——————————————————————————– Sure. So we’re going to continue to be opportunistic. We’ll always continue to look for avenues of access for sports betting and iGaming through bricks-and-mortar as well as what you mentioned, the license applications to open states. So there’s opportunity there. And in addition to that, we’re going to continue to look for complementary technologies, platforms that we could add that will complement sports betting and iGaming. A good example of that is the acquisitions of Monkey Knife Fight and then SportCaller. So yes, we’re going to — the opportunity is there, we’re looking for access, and we’re going to try and capitalize on that. ——————————————————————————– Operator  ——————————————————————————– Your next question comes from the line of Jeff Stantial with Stifel. ——————————————————————————– Jeffrey Austin Stantial, Stifel, Nicolaus & Company, Incorporated, Research Division – Associate  ——————————————————————————– So you completed the rebrand to the Bally’s back in early November. Just curious, now you’re in a couple of months in, do you have any updated thoughts on how you plan to leverage the brand moving forward? Have you done any survey work on kind of brand awareness with your database or anything like that? Just anything you could share there would be helpful? ——————————————————————————– George T. Papanier, Bally’s Corporation – President, CEO & Director  ——————————————————————————– Sure. So Marc, I’m going to pass this over to you. ——————————————————————————– Marc A. Crisafulli, Bally’s Corporation – Executive VP of Strategy & Operations, President of Rhode Island Operations and Director  ——————————————————————————– Yes. Happy to do it. Yes. Look, we’ve made a lot of progress since we announced the acquisition in November. We are almost done with all of our work, and you can expect in the second quarter to start to see significant heavy activity around rebranding most of our assets. On the land-based side, we’re getting ready to launch the renaming of the Fox Sports assets that Sinclair has into Bally’s Sports. So we’re pretty excited about that. It’s all moving along pretty nicely. If you can just kind of monitor things over the next 60 days, you’ll start to see the tangible progress from it. ——————————————————————————– Jeffrey Austin Stantial, Stifel, Nicolaus & Company, Incorporated, Research Division – Associate  ——————————————————————————– Okay. Great. Helpful. And then just switching gears over to the Interactive side. Look, we talk a lot about the omnichannel approach and kind of that synergistic impact of offering both retail and online gaming in a given market. And I know it’s — I realize it’s still early days here as we are coming up on the app rollout. But I wanted to just get your thoughts on how you see that advantage playing out relative to call it your strictly online peers? Any parameters you could provide around that would be helpful, whether in terms of expectations around relative ADTs and markets with versus without online and cross-selling opportunities, to and from the casino, really anything you have there would be helpful? ——————————————————————————– Marc A. Crisafulli, Bally’s Corporation – Executive VP of Strategy & Operations, President of Rhode Island Operations and Director  ——————————————————————————– That’s a really loaded question, and so I’ll turn it over to Adi, and he’ll try and touch on some parts of it. ——————————————————————————– Adi Dhandhania; VP of Strategy and Interactive,  ——————————————————————————– Sure. Thank you for the question. I think, look, the way to think about this is we have a multipronged approach. So you’re right, we have casino databases in states we operate our own casino. So we will be marketing to that database. The other thing to think about is the relationship with Sinclair gives us access to a variety of assets, right? We touched on the Regional Sports Networks, which will be renamed to Bally’s Sports net going forward. We also have access to their broadcast TV stations, that penetrate roughly 70% of the U.S. households. We also get tennis channels and multi-platform assets such as stadium and OTT platforms. So thinking about all of the different assets that we have with our database and the reach and distribution we get from Sinclair, you can expect us to come up with integrated content and gamified content as we roll out our Bally’s bet platform. ——————————————————————————– Operator  ——————————————————————————– Your next question comes from the line of Lance Vitanza with Cowen. ——————————————————————————– Lance William Vitanza, Cowen and Company, LLC, Research Division – MD & Cross-Capital Structure Analyst  ——————————————————————————– Maybe just one on the bricks-and-mortar business and then 1 on the interactive side, if I can. On the first question, on Slide 16, in your deck, you have the post-COVID pro forma EBITDA run rate of $331 million. I think you’ve had that out there before. But my question is, could you bridge from the $300 million pro forma number in 2019 to the $331 million post-COVID? I mean they’re both pro forma. So I assume it’s not the additional properties. So is that just — well, I’ll let you tell me what that is? ——————————————————————————– George T. Papanier, Bally’s Corporation – President, CEO & Director  ——————————————————————————– Yes, Steve, could you handle that? Yes. ——————————————————————————– Stephen H. Capp, Bally’s Corporation – Executive VP & CFO  ——————————————————————————– Yes. Lance, what’s the first number you look at? You’re looking at 2019… ——————————————————————————– Lance William Vitanza, Cowen and Company, LLC, Research Division – MD & Cross-Capital Structure Analyst  ——————————————————————————– The $300 million going to a post-COVID run rate of $331 million. ——————————————————————————– Stephen H. Capp, Bally’s Corporation – Executive VP & CFO  ——————————————————————————– Yes. Listen, the ’19 number was all of those properties, historically, to the extent that — to the extent we had that data, more of an actual representation in a pre-COVID environment. And so we used that as the starting point or the step off point, if you will, for a post-COVID pro forma management expectation. Included in that $331 million, Lance, there is the impact of some of the CapEx initiatives that we have talked about on this call, but not all of them because some of them are a little longer in the tooth, if you will. So hence, our commentary that, that number is — we consider that to be kind of middle of the road. Meaning that there’s upside in this portfolio, we believe, in a post-COVID world, well into the mid-$300s million on a post-CapEx basis. ——————————————————————————– Lance William Vitanza, Cowen and Company, LLC, Research Division – MD & Cross-Capital Structure Analyst  ——————————————————————————– And I guess, is it fair to assume that some of that improvement is also just from — George, you talked about being able to maintain — or maybe it was usually — you talked about being able to maintaining the margin improvements even as the traffic comes back as we put some distance between COVID? ——————————————————————————– Stephen H. Capp, Bally’s Corporation – Executive VP & CFO  ——————————————————————————– Yes. Well some of those. George commented on this in his comments earlier. Not necessarily all of them, Lance, because, look, when the — in a post-COVID world, assuming competitiveness starts to ramp up again, we’re likely to see some pressure on the marketing spend. But as it relates to labor savings and other cost initiatives we’ve gotten smarter about, yes, we intend to carry those forward. ——————————————————————————– Lance William Vitanza, Cowen and Company, LLC, Research Division – MD & Cross-Capital Structure Analyst  ——————————————————————————– Okay. And then just on the interactive side. I don’t know that I’ve ever seen a company in top so much in such a short period of time in terms of all of the partnerships and acquisitions that you’ve announced. As you think about going forward from here, should we expect additional acquisitions or partnerships? Or do you think you’ve got the right asset mix at this time? We’ve certainly gotten to a point where we sort of pause on that part of the growth? ——————————————————————————– George T. Papanier, Bally’s Corporation – President, CEO & Director  ——————————————————————————– Lance, I touched on that a little bit earlier. So yes, we’re going to continue to look for complementary technologies and platforms. So anything that we feel is going to complement our efforts for sports betting. And ultimately, iGaming will continue to bring on and into the company. ——————————————————————————– Lance William Vitanza, Cowen and Company, LLC, Research Division – MD & Cross-Capital Structure Analyst  ——————————————————————————– So full speed ahead there. ——————————————————————————– George T. Papanier, Bally’s Corporation – President, CEO & Director  ——————————————————————————– Yes. ——————————————————————————– Lance William Vitanza, Cowen and Company, LLC, Research Division – MD & Cross-Capital Structure Analyst  ——————————————————————————– Okay. Great. With respect to the Bet.Works piece, initially that was expected to close in the first quarter. Now it sounds like it’s the end of the second quarter. Just wondering why the delay? And is there anything we should be concerned about given that delay, either from a regulatory or a diligence standpoint? ——————————————————————————– George T. Papanier, Bally’s Corporation – President, CEO & Director  ——————————————————————————– Marc, do you want to handle that? ——————————————————————————– Marc A. Crisafulli, Bally’s Corporation – Executive VP of Strategy & Operations, President of Rhode Island Operations and Director  ——————————————————————————– Yes. Yes, absolutely, no concern at all. Nothing has changed. We’re just going through the regulatory process. That’s going very smoothly. We’re really — we’re just focused on Indiana right now. That’s kind of the last place we need to get done. And in the Indiana Gaming Commission, they have a lot of things going on. They’ve been wonderful to work with, but they meet only once a quarter. And this has essentially been lumped in for approval, it appears with our acquisition of the Tropicana Evansville. So we’re kind of targeting the June, Indiana Gaming Commission session to have both considered at the same time. ——————————————————————————– Operator  ——————————————————————————– We have reached the allotted time for questions. I will now turn the floor back over to George Papanier for any additional or closing remarks. ——————————————————————————– George T. Papanier, Bally’s Corporation – President, CEO & Director  ——————————————————————————– Well, thank you, everyone. We’re looking forward to continuing into an impressive 2021. And I want to thank you for joining our call today. ——————————————————————————– Operator  ——————————————————————————– This concludes today’s Bally’s Fourth Quarter 2020 Earnings Call. Please disconnect your lines at this time, and have a wonderful day.